The current rules require Virgin’s international operation to be majority Australian owned, but do not place the same restrictions on its domestic airline. Virgin is planning the restructure to allow a greater foreign shareholding in the domestic business, while keeping the international arm in compliance with Australian law.
Qantas, perhaps unsurprisingly (and given its own restrictions under the Qantas Sale Act), has objected, telling the International Air Services Commission that:
“Qantas is very concerned that the proposed structure is likely to result in foreign persons having effective control of the day-to-day operations of [Virgin’s international business], in breach of Australia’s obligations under many air service agreements”
The Australian Financial Review today has suggested, I think rightly, that Qantas does not expect to be successful in its submission, but instead is using the issue to bring attention to its own limitations in light of a current Senate subcommittee hearing on the Qantas Sale Act.
In either circumstance, I continue to believe investment in airlines is a very, very difficult pursuit, and am more than happy putting my capital to work in other places.
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Scott Phillips is a Motley Fool investment analyst. You can follow him on Twitter @TMFGilla. The Motley Fool’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691).
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